The role of the Philippines in the BIMP-EAGA growth triangle and the dynamics of ASEAN political economy

Transcription

1 University of Wollongong Theses Collection University of Wollongong Theses Collection University of Wollongong Year 2008 The role of the Philippines in the BIMP-EAGA growth triangle and the dynamics of ASEAN political economy Adriana Elisabeth University of Wollongong Elisabeth, Adriana, The role of the Philippines in the BIMP-EAGA growth triangle and the dynamics of ASEAN political economy, PhD thesis, Department of History and Politics, University of Wollongong, This paper is posted at Research Online.

2

3 THE ROLE OF THE PHILIPPINES IN THE BIMP-EAGA GROWTH TRIANGLE AND THE DYNAMICS OF ASEAN POLITICAL ECONOMY A thesis submitted in partial fulfilment of the requirements for the award of the degree DOCTOR OF PHILOSOPHY from UNIVERSITY OF WOLLONGONG by ADRIANA ELISABETH, MASTER OF SOCIAL SIENCE DEPARTMENT OF HISTORY AND POLITICS 2008

4 CERTIFICATION I, Adriana Elisabeth, declare that this thesis, submitted in partial fulfillment of the requirements for the award of Doctor of Philosophy, in the Department of History and Politics, University of Wollongong is wholly my own work unless otherwise referenced or acknowledged. The document has not been submitted for qualifications at any other academic institution. Adriana Elisabeth 21 April 2008 i

5 TABLE OF CONTENTS THESIS CERTIFICATION TABLE OF CONTENTS LIST OF TABLES, FIGURES & CHART LIST OF ABBREVIATIONS ABSTRACT ACKNOWLEDGEMENTS Pages i ii iv v x xii INTRODUCTION 1 Background of Study 1 Research Methodology 15 Key Research Issues 21 CHAPTER I. THE ESTABLISHMENT OF BIMP-EAGA 31 Regionalism and the Formation of EAGA 35 The Area of EAGA 42 The Aims of EAGA 51 The Structure of EAGA 54 Some Progress in EAGA Activities 56 The Implications of EAGA 59 CHAPTER II. THE GROWTH TRIANGLE AND PHILIPPINE POLITICS 68 Discrimination Policy Against Mindanao 68 Ramos s Political Leadership and BIMP-EAGA 72 Philippine Macro-Economic Policy 87 Philippine Political Culture 90 Religion and Politics in the Philippines 98 Chinese Sub-Culture in the Philippines 101 EAGA and the Mindanao Crisis 104 Military and Politics 112 EAGA: Expectation or Desperation? 115 CHAPTER III. THE PHILIPPINES AND ASEAN RELATIONS 119 The Establishment of ASEAN 120 ASEAN and Previous Regional Associations 123 Problems within ASEAN 127 ASEAN and Its Prospects 139 ASEAN and EAGA 142 Philippine Foreign Policy and ASEAN 144 The Estrada Administration ( ) 152 The US and the Philippines 156 ii

6 The Arroyo Administration and EAGA 166 Philippines-ASEAN Relations: Some Possible Scenarios 170 CHAPTER IV. BIMP-EAGA AND REGIONAL DEVELOPMENT PLANNING 175 Liberalism Capitalism 176 The Interpretation of Global Capitalism in Southeast Asia 179 Progress of EAGA Economic Activities 186 EAGA and Some Exiting Problems Export Processing Zones and Growth Triangles Corruption and the Vulnerability of EAGA Corruption and Poverty 215 Economy and Armed Conflict 217 EAGA and Wider Regional Factors 219 The Role of China 224 The Mindanao 2000 Plan Policy Formulation, Aplication, and Coordination The Role of Private Sector Evaluation and Monitoring Mechanism/Scheme The Availability of a Database of EAGA Economic Activities The Problem of Migration 239 CHAPTER V. THE FUTURE OF BIMP-EAGA 241 EAGA from an Optimistic Point of View 241 GMA Special Envoy and Agenda for EAGA 243 EAGA from a Pessimistic Point of View The Mindanao Armed Conflicts Religious Conflicts in Indonesia The Regional Approach to Combating Radical Religious Movements 251 The Future Prospects of EAGA 253 CONCLUSION 258 The Decay of EAGA 259 Is EAGA still Relevant? 266 BIBLIOGRAPHY 270 APPENDICES 293 Appendix 1: The List of Respondents 293 Appendix 2: The List of Libraries/Information Center 295 iii

7 LIST OF TABLE, FIGURE & CHART TABLES Table 1. The Early Action Plan of BIMP-EAGA 45 Table 2. The EAGA Spatial Development Plan 46 Table 3. Poverty Levels in the Philippines ( ) 84 Table 4. Annual per Capita Poverty in the Philippines ( ) 85 Table 5. Poverty Incidence of Families in the Philippines ( ) 86 Table 6. Poverty Incidence of Population in the Philippines ( ) 87 Table 7. ASEAN Member Countries per Capita GDP (US dollars, billions) 1996 & Table 8. ASEAN Member Countries per Capita GDP (US dollars) Table 9. EAGA in the Global Circles 179 Table 10. Policy Implication and EAGA Projects ( ) 187 FIGURES Figure 1. MAP OF THE PHILIPPINES 14 Figure 2. MAP OF THE BIMP-EAGA AREA (before the inclusion of the other Indonesian provinces) 43 Figure 3. MAP OF THE BIMP-EAGA PROVINCES 52 CHARTS Chart 1. The EAGA Development Strategy: Monitor and Review 48 Chart 2. The Structure of EAGA 54 iv

8 LIST OF ABBREVIATIONS ACED ADB AFP AFTA AFTA-CER Archdiocesan Ecumenical and Inter-religious Dialogue Asian Development Bank Armed Forces of the Philippines ASEAN Free Trade Area ASEAN Free Trade Area (Australia and New Zealand) Closer Economic Relations AIA AICO AIPO AMC AMM APEC APT ARF ARMM ASA ASEAN ASG BAPPENAS BGF BIMP-EAGA ASEAN Investment Area ASEAN Industrial Cooperation ASEAN Inter-Parliamentary Association Area Marketing Cooperative ASEAN Ministerial Meeting Asia Pacific Economic Cooperation ASEAN Plus Three ASEAN Regional Forum Autonomous Region in Muslim Mindanao Association of Southeast Asia Association of South East Asian Nations Abu Sayyaf Group Badan Perencanaan dan Pembangunan Nasional Barrio Guarantee Fund Brunei Darussalam, Indonesia, Malaysia, Philippines - East ASEAN Growth Area CAT Central Azucarera de Tarlac v

9 CBCP CPP CU EABC EAGA EOI EPZ EU FDI FTAA Catholic Bishop s Conference of the Philippines Communist Party of the Philippines Customs Union EAGA Business Council East Asean Growth Area Export Oriented Industrialisation Export Processing Zone European Union Foreign Direct Investment Financial or Technical Assistance Agreement G-7 Group of 7 GDP GEM GMA GRP GT HRD IACC ICMI I-EAGA IID IMF IMS-GT IMT-GT IRD Gross Domestic Product Growth with Equity in Mindanao Gloria Macapagal Arroyo Government of the Republic of the Philippines Growth Triangle Human Resources Development Inter-Agency Anti-Graft Coordinating Council Ikatan Cendekiawan Muslim Indonesia Indonesia-East ASEAN Growth Area Initiative for International Dialogue International Monetary Fund Indonesia, Malaysia, Singpore Growth Triangle Indonesia, Malaysia, Thailand Growth Triangle Inter-Religious Dialogues vi

10 IT ITO JI JPDCI JVA KAPET KEPPRES KPPSI LDC LGC LGU LIPI LPG MAPHILINDO MEF MEDCO MNC MNLF MILF MOA MOU MT NAFTA NCCP NDF Information Technology International Trade Organisation Jemaah Islamiyah Janoub Philippines Development Corp Inc. Joint Venture Agreement Kawasan Pengembangan Ekonomi Terpadu Keputusan Presiden Komisi Persiapan Penerapan Syariah Islam Less Developed Country Local Government Code Local Government Unit Lembaga Ilmu Pengetahuan Indonesia Liquid Petroleum Gas Malaysia, Philippines, Indonesia Malaysian Employers Federation Mindanao Economic Development Council Multi National Corporation Moro National Liberation Front Moro Islamic Liberation Front Memoranda of Agreement Memoranda of Understanding Metric Tons North American Free Trade Area National Council of Churches in the Philippines National Democratic Front vii

11 NGO NIC NPA NRM OECD OIC PAL PARECO PCAGC PCGG PCI-Bank P-EAGA PLDT REPELITA RIA RMS SARA SEATO SEC SIJORI SN SOCSARGEN SOMM TAC UN Non Governmental Organisation New Industrialised Country New People s Army New Religious Movement Organization for Economic Cooperation and Development Organisation on Islamic Conference Philippine Airlines Presidential Assistant for Regional Concern Presidential Commission Against Graft and Corruption Presidential Commission on Good Government Philippine Commercial International Bank Philippines-East ASEAN Growth Area Philippine Long Distance Telephone Company Rencana Pembangunan Lima Tahun Regional Integration Agreement Republik Maluku Selatan Suku, Agama, Ras South East Asia Treaty Organisation Security and Exchange Commission Singpore, Johor, Indonesia Samahang Nayon South Cotabato, Sarangani, General Santos City Senior Officials and Ministers Meeting Treaty of Amity and Cooperation United Nations viii

12 UR-GATT VFA WB WMC WTO ZOPFAN Uruguay Round of the General Agreement on Tariffs and Trade Visiting Forces Agreement World Bank Western Mining Corporation World Trade Organisation Zone of Peace, Freedom and Neutrality ix

13 Abstract The title of the dissertation is The Role of the Philippines in Growth Triangle and the Dynamics of ASEAN Political Economy. It looks into the role of the Philippines in establishing the first growth quadrangle in South East Asia or the Brunei, Indonesia, Malaysia, Philippines - East ASEAN Growth Area (BIMP-EAGA or simply EAGA). There was no EAGA without Philippine enthusiastic in proposing the idea. EAGA became the first sub-regional economic cooperation to back up Philippine national development program; that is the Philippines 2000 and the NIC-hood vision. The establishment of EAGA represented Philippine foreign relations with regional countries, and the Association of South East Asian Nation (ASEAN) as the longest running regional association. The relevance of EAGA was in controversy. The affirmative perspective ensured that EAGA was built in economic term to promote trade, investment and tourism for the regional countries, which experienced similar historical of colonialism, and cultural and religious backgrounds. Some achievements have been made through many numbers of working groups meetings, expositions and conferences since the EAGA formation in 1994 until now. On the other hand, the pessimistic perspective highlighted the negative impacts of the EAGA growth quadrangle. The failure of poverty eradication was one of the social impacts. EAGA seems to be more hopeless when indicated to problems, which exist at the national, regional and global levels and related each other. Crony capitalism, interreligious conflicts and process of democracy are major domestic issues that have x

14 affected the EAGA business activities, besides the Asian Crisis in The practice of crony capitalism is related to domestic political culture and the influence of market orientation or economic liberalism. Global war against terrorism is another international factor, which affected regional political development. The future of EAGA is clearly dependent on to what extents member countries can cope with their domestic problems. Similar phenomenon happened with ASEAN in which its function as regional economic integration has been subordinated by the dominance of political disputes bilaterally and multilaterally. xi

15 ACKNOWLEDGEMENTS I would like to acknowledge with gratitude the guidance, encouragement and understanding provided by my supervisors, Professor Adrian Vickers and Dr. Peter Sales throughout the years. My thanks also go to my Australian, Indonesian and Filipino friends for making my research a valuable and rewarding experience. I wish to extent my appreciation and thanks to my mother, Evie and my husband, Tonny, who have provided moral support and patient. Finally, I would like to express my deepest appreciation to my lovely daughters, Sandra and Prissy for their continuos care and support. xii

16 INTRODUCTION Background of the Study The Brunei Darussalam, Indonesia, Malaysia, the Philippines East ASEAN Growth Area (BIMP-EAGA or simply EAGA) was built with as much confidence as other subregional economic cooperation projects, such as the Indonesia, Malaysia, Singapore Growth Triangle (IMS-GT) and the Indonesia, Malaysia, Thailand Growth Triangle (IMT-GT). The concept of growth triangles is relatively new in Southeast Asia. It first appeared in 1989 with the establishment of the IMS-GT, originally called SIJORI, after the component countries, Singapore, Johor (Malaysia) and Riau (Indonesia). These growth triangles are outcomes of the Association of South East Asian Nations (ASEAN), unlike other cross-regional economic zones, such as the Mekong Project, which links Cambodia, Vietnam, Laos and southern China around the shared resources of the Mekong River. ASEAN is the only extent regional economic organization in Southeast Asia. However, ASEAN s economic activities have some limitations because of political and security matters. As a sub-regional planning body of ASEAN, economic activities of EAGA have also been limited by political and security issues, which develop at the individual sub-regions, within the sub-regions, and the global level. Therefore, it is important to examine the significance of EAGA as part of the ASEAN development planning bodies, and part of the globalisation process. Development in the regional context can be understood in terms of economic integration and economic interdependence and these will be examined with reference to the establishment of EAGA. The establishment process has had similar characteristics to that of other sub-regional economic integration 1

17 initiatives, including geographical proximity, economic complementarity, outwardlooking development strategy, acceleration of economic reform and open-door policy, and political decentralisation. 1 Yaw A. Debrah, Ian McGovern and Pawn Budhwar also mentioned similar characteristics of sub-regional economic integration. There are four main pre-requisites for the success of a growth triangle: geographical proximity, economic complementarity, strong political commitment and effective policy coordination, and adequate infrastructure and resources. 2 The capability of EAGA, is a measure of the success or failure of such regional development processes, particularly as regards four major issues: trade, investment, tourism, and people movement or mobility. This thesis attempts to enhance our understanding of the dynamics of Southeast Asia s political economy by focussing on EAGA as one component part of ASEAN, and then on the actions and motivations of the Philippines as the pioneer of EAGA. The growth triangles provide an alternative model of sub-regional cooperation because they require co-operation between bordering areas within countries rather than of entire countries. They are generally viewed as part of an attempt to establish an ASEAN freetrade area. BIMP-EAGA covers the provinces of the eastern part of Indonesia that border the eastern part of Malaysia and the southern part of the Philippines; it was established in October States and businesses are two important actors in EAGA. EAGA states are the facilitators, while businesses are the engine of EAGA cross-border economic transactions in promoting trade, investment and tourism. For the Philippines 1 See Edward Chen & C.H. Kwan (1997). Asia s Borderless Economy, The Emergence of Sub-regional Zones, St. Leonards: Allen & Unwin, p Yaw A. Debrah, Ian McGovern & Pawn Budhwar (2000). Complementarity or competition: the development of human resources in a South-East Asian Growth Triangle: Indonesia, Malaysia and Singapore, the International Journal of Human Resource Management (2 April 2000), pp The whole of Brunei Darussalam (B-EAGA) is included because it is the smallest among EAGA countries; see Figure 2, Map of the BIMP-EAGA Area. 2

18 in particular, EAGA economic activities are an important part of national development programs. Such cross-border economic transactions have basic characteristics, such as deriving from the evolution of natural economic linkages; [they are] limited in substantive and geographic scope political and economic complexities; modest participation in more than one growth triangle; outward-looking orientation; and sub-regional initiatives related to general forms of regional cooperation. 4 For these reasons, BIMP-EAGA functions like a miniature ASEAN, and like ASEAN, EAGA is caught up in the political and economic complexities of country-to-country relationships. Paradoxically, closer relations between the countries involved have developed partly as a consequence of the Asian financial and economic crisis in 1997, as will be shown in later chapters. However, this same crisis means that, especially in close border and boundary areas, domestic problems in one country can very quickly affect another country, such is the case when Indonesian undocumented workers enter Malaysia through the border area of West and East Kalimantan. One of the push factors is problem of unemployment in Indonesia, which caused the workers going and trying to earn better money in Malaysia. Most studies on the growth triangle model focus on economic matters. This is reasonable, given that economics are the basis of the growth triangle model. However, the economic aspects are related to political and security problems. Both of these require greater attention, as they have exerted the most pressure on sub-regional economic cooperation at many different levels. EAGA has attempted to develop trade, investment and tourist activities, for example, in what are some of the most troubled 4 George Abonyi (1996). The Challenges of Growth Triangles for Regional Institutions. In Imran Lim ed. Growth Triangles in Southeast Asia, Strategy for Development. Kuala Lumpur: ISIS Malaysia, pp

19 areas of both Indonesia and the Philippines. The Indonesia-EAGA (I-EAGA) provinces, which are mostly located in the eastern part of Indonesia, are where communal, religious and violent conflicts have occurred. The I-EAGA provinces border on and have received refugees from Indonesia s major zones of conflict since the late 1990s: Ambon (Moluccas), Poso (Central Sulawesi) and Papua. On the Philippines side, Mindanao (the largest island of the southern Philippines) is the major area of the Philippines-EAGA (P-EAGA), but Mindanao is the area where on-going armed conflict has occurred. 5 The establishment of P-EAGA is a good example to use in order to examine how Philippine leadership can be in formulating sub-regional development policy, and how such leadership could finally integrate sub-regional countries of Southeast Asia through EAGA economic cooperation. The P-EAGA is also a good example to prove that the Mindanao problem could be solved without using a military approach, particularly because solving that problem necessitated dealing with poverty. Poverty in Mindanao (and in other EAGA areas) is a result of a development gap. Therefore, one of EAGA S longer term plans is to deal with that development gap, in particular through poverty alleviation. During the Ramos presidency ( ), the P-EAGA brought relatively positive impacts to Mindanao following the 1996 peace agreement that could temporarily terminated the armed conflict. When the 1997 Asian financial crisis hit many countries in Asia, but not the Philippines, the P-EAGA benefited border trade areas, especially the border area with Indonesia. 5 The armed conflict is between the Moro (or Muslim groups) and the Armed Forces of the Philippines (AFP). 4

20 The progress of the P-EAGA was affected by the global war on terror where Mindanao has been the basis of terrorist activities and also the battle ground for combating terrorism in Southeast Asia. Since the September 11 tragedy, Mindanao has become one of the focuses of the global war against terror declared by George W. Bush, the President of the United States of America (USA). In the US policy to quash Al Qaeda, Mindanao ranks second to Afghanistan as the place to combat terrorism and prevent its spread throughout Asia. Compared to the previous growth triangles in Southeast Asia, the P-EAGA has been the most conflicted area. Mindanao and Palawan are the two main P-EAGA areas where most of Philippine agricultural products come from, but it is also where armed conflicts between the Philippine military the Moro separatist movements mostly occur. The P-EAGA formation, in some stage, could reduce tensions between the conflicted parties, particularly under the 1996 peace agreement, which was signed between the Government of the Republic of the Philippines (GRP) and the Moro Muslim group or the Moro National Liberation Front (MNLF). After the formation of EAGA in 1994 until the September 11 tragedy in 2001, the progress of EAGA economic activities was relatively limited. However, since the declaration of US global war policy against terrorism in 2001, the P-EAGA sub-region was also included in the US target area for combating terrorism because of the existence of the ASG (Abu Sayyaf Group) a local terrorist group in the Southern Philippines. In summary, the conflict in Mindanao has an international dimension, especially in relation to the Muslim world and neighbouring countries, and also regarding the war on terrorism at the international level. 6 6 See Philippines, the International Context (September 2002), Global IDP, p. 1. < (accessed 29 June 2004). 5

21 The terrorist activities had a negative implication to the limited progress of the EAGA economic plans because of the terrorist mobility within the EAGA areas. On the other side, regarding the issue on terrorism, EAGA had been revitalised as a forum, primarily to prevent the spread of terrorism in Southeast Asia. This was different from the objectives of EAGA sub-regional economic zones. EAGA is economically potential, but its potential has security implications, which depends on how the EAGA planners administer the cooperation. Amitav Acharya is one of the few authors who wrote about the security implications for trans-national economic activities in the growth triangles. 7 This is what Acharya tried to show, that like other trans-national economic activities, growth triangles have the potential to promote peaceful inter-state relations, but at the same time, there are inter and intra-state conflicts have also the potential to disrupt economic activities. 8 Acharya points out that besides bilateral conflicts or inter-state tensions, there are also signs that the emergence of certain types of trans-national economic activity might foster greater intra-state tensions, such as domestic political problems. 9 He refers here to smuggling, but also to potential encouragement or support for separatist or terrorist groups by groups within neighbouring countries. There is evidence for this in Indonesia and the Philippines where there are serious internal conflicts in the areas just discussed. The internal conflicts in Indonesia and the Philippines share similarities in their basic characteristics, since they are problems of political identity and conflicts over natural resources, and they are also linked by the kinds of activities to which Acharya refers. This thesis will expand Acharya s argument by focussing on the implications of these trans-national elements within the dynamics of politics in the Philippines. 7 Amitav Acharya (1996). Security Implications of Transnational Economic Activities Associated with the Growth Triangles. in Lim, op. cit., pp Ibid., pp Acharya op. cit., pp

22 The Philippines and Malaysia have a long-standing territorial dispute over Sabah in the northern part of Borneo. The two countries have been carrying on negotiations and consultations, but no clear result has yet been achieved. 10 The potential for conflict between Indonesia and Malaysia has also existed since the period , when Malaysia aimed to integrate Brunei, Sabah and Sarawak under the umbrella of the Malay Lands Association (Persekutuan Tanah Melayu). Malaysia s political move was strongly rejected by Sukarno, the first Indonesian president. This rejection led to Confrontation between Indonesia and Malaysia, which formally started when the Indonesian Minister of Foreign Affairs, Soebandrio announced Indonesia s opposition to the formation of the new state of Malaysia. 11 The resulting conflict also involved internal disputes within Brunei, and was only resolved after Sukarno was replaced by Suharto. In later years, Malaysia successfully laid claim to Sipadan and Ligitan islands. 12 Political tension between the two neighbouring countries also arises because of the continuing presence of Indonesian undocumented migrant workers in Malaysia. These workers, who come to Malaysia illegally, have been deported several times, although both sides dispute the circumstances of these deportations, with Indonesia claiming that the Malaysian government covertly encourages the illegal workers in order to keep labour costs down, and then acts against them when it is politically or economically expedient. Tensions are heightened by Indonesian reports that while in Malaysia, some of these workers have also suffered from acts of violence, such as torture, sexual harassment, and murder. 10 See Philippines Claim to Sabah (accessed 6 January 2006). 11 See Konfrontasi Indonesia-Malaysia (accessed 6 January 2006). 12 In recent times, there has been another territorial dispute between Indonesia and Malaysia over the Ambalat block in what Indonesia claims are the waters of its part of the island of Borneo, Kalimantan. 7

23 Unresolved problems regarding bilateral disputes, in combination with ongoing violent domestic conflicts, could have been predicted to have an impact on the effectiveness of EAGA from its inception. However, these intra-state and inter-state conflicts did not discourage EAGA planners, who, as this thesis will show, saw EAGA as a solution to the problems. From ASEAN s in 1967 until the end of 1980s, it was primarily focussed on the economic sector. However in that period it achieved limited progress because of territorial disputes and bilateral conflicts, and because of internal conflicts within the member states. In 1989, regional development planning under ASEAN was then shifted to the sub-regional level through the formation of SIJORI/IMS-GT, which was then followed by the establishment of EAGA in Although the main objectives of subregional development planning are to accelerate national development programs through trade and investment, the reality shows that politics and security are major factors in determining the effectiveness of sub-regional economic cooperation, including in the case of EAGA. The lack of political analysis of the growth triangles is one reason for undertaking the present study. A second reason for writing this thesis is that while the formation of BIMP-EAGA seems to mirror the key components of ASEAN, in fact this growth triangle contrasts with ASEAN, because ASEAN aims to establish open regionalism. BIMP-EAGA was formed for sub-regional economic cooperation because ASEAN had made so little progress in promoting regional economic development. 8

24 EAGA has been chosen as the unit of analysis because it is the first quadrangle in eastern ASEAN that was initiated by the Philippines. The Philippines is the only member of the EAGA quadrangle that has not been involved in other sub-regional economic zones. The Philippines idea for EAGA was that it would accelerate the Philippines national development program and promote Mindanao as a new economic zone. Therefore this study, as well as being a contribution to the political economy of ASEAN, especially aims at contributing to the understanding of the political economy of the Philippines. This aims comes because of, but also despite the fact that there are very limited writings on the latter subject. The limitations of these writings mean that there are many difficulties in examining EAGA from the Philippines point of view. The establishment of EAGA is linked to Philippine foreign policy. Since the closure in 1991 of America s military bases in the Philippines, at Subic Bay and Clark Field, the Philippine state decided to pay more attention to Asia, especially to ASEAN. The Philippines involvement in EAGA is the clearest evidence of this. The Philippines was more than just a participant country, it was the pioneer that proposed the idea to Brunei for the first time in The establishment was formally achieved two years later, in March 1994 during the ASEAN Head of Governments and Senior Ministerial Meeting in Davao City, Mindanao. The Philippines ambition was also related to a vision of achieving the status of a new industrialising country (NIC), a status exemplified by the achievements of South Korea, Taiwan and Singapore as emerging economic forces in the region. Former President Fidel Ramos, who was the central figure of EAGA, decided on deregulation and privatisation policies in order to make the country one of the NICs of East Asia. EAGA is thus associated with the implementation of national policies designed to meet the challenges of the Philippines economy, in particular 9

25 through the Mindanao 2000 program, which was one of the chief policies put forward during the period in which EAGA was developed. As will be shown, EAGA was a political tool to gain regional support in dealing with the Mindanao crisis in terms of peace and order, and to achieve this it aimed to solve economic disparity and social discrimination. This was consistent with statements made by President Ramos that foreign relation and domestic preferences should be regarded as equivalent in terms of their interrelationship in policy formulation. 13 The establishment of EAGA would probably not have happened without the Philippines efforts, its enthusiasm, and its political leadership in the region. Thus, this thesis also means to provide and enhance an understanding of the dynamics of the Philippines political economy within Southeast Asia. It will focus on the period This period has been chosen because during that time policies toward EAGA fluctuated due to political transformations in the Philippines. The period begins with the Ramos administration and continues up to the first period of the Gloria Macapagal Arroyo (GMA) presidency ( ). 14 Ramos came to power in 1992 and continued as president until EAGA unfortunately lost its most eminent backer during the Estrada presidency ( ) when it was downgraded by an all-out war policy against the Moro insurgency. Estrada s successor, President Gloria Macapagal Arroyo gave signs that the growth area should be revived, but this approach has fallen victim to circumstances. 13 Gina R. Pattugalan, A Review of Philippine Foreign Policy under the Ramos Administration, Kasarinlan, A Philippine Journal of Third World Studies (1999), v.14, nos.3 & 4, p President Gloria Macapagal Arroyo came to power in 2001 after the impeachment of former president, Joseph Estrada. She continued his presidency until June 2004 and was re-elected for the period

26 Although EAGA includes Malaysia and Brunei Darussalam, this study does not focus on those two countries because it is not seen as crucial to the political or economic development of either. Malaysia has the IMS-GT and IMT-GT, and so any discussion of Malaysia would necessitate examining it in relation to these two entities before EAGA. Malaysia, Indonesia and Singapore showed enthusiasm in promoting trade and investment through the IMS-GT as the first sub-regional economic cooperation in Southeast Asia, and for these countries, particularly Indonesia and Singapore, the IMS- GT has continued to play a significant role. Malaysia was the engine of IMT-GT, playing a role parallel to that of the Philippines for EAGA. Malaysia and Brunei Darussalam are important members because of their investments in EAGA, but there has been no direct correlation between EAGA regional development planning and their national development programs. This is why it is more significant to discuss EAGA in terms of the Philippines national development programs and its political and economic dynamics. In the Indonesian case, EAGA has also not been a significant part of national development planning. In any case Indonesia s economic planning has undergone significant shifts since the fall of the Suharto regime in 1998 put an end to the country s rolling series of five-year plans (REPELITA). My field research on the EAGA quadrangle was done during in Indonesia and the Philippines. I am a member of the Indonesian Institute of Sciences (Lembaga Ilmu Pengetahuan Indonesia or LIPI) Center for Political and Regional Studies, and in that role carried out annual surveys of EAGA from the Indonesian side. The Center s name has now been changed to the Research Center for Politics, and it no longer carries 11

27 out research on growth triangles, but rather has shifted its attention to issues of federalism connected with Indonesia s regional autonomy policy that was formulated in 1999 and implemented after This change shows that EAGA is not of major significance to Indonesia. As a LIPI researcher, I had the opportunity to study EAGA and its relevance in accelerating development in the eastern part of Indonesia, especially in North and South Sulawesi Provinces. During the first year ( ), the LIPI project aimed to describe the concept of a growth triangle. This was an introductory investigation about the concept as a model of economic cooperation for developing the eastern part of ASEAN. The following year, the focus was more specific, on the development of Indonesia s exports in the zone. In , the study of EAGA concentrated on the bureaucratic organisation and regulation in some of the provinces in eastern Indonesia that are included in EAGA, namely West and East Kalimantan, and North and Southeast Sulawesi. Foreign investment strategy in the eastern Indonesia region was the topic for the year , and finally, there was an evaluation of the sub-regional economic cooperation from the Indonesian perspective in The study was sponsored by the National Planning Body, Bappenas (Badan Perencanaan Nasional). It primarily resulted a list of potential sectors on which Indonesia could rely for its part of the development, such as the marine tourism industry and construction. Problems were also identified, such as lack of policy and regulation harmonisation, inadequate infrastructure and bureaucratic red tape. I have made several subsequent visits to the region as part of other projects. 12

28 When I conducted my fieldwork in North and Southeast Sulawesi, I found that the concept of EAGA was not widely known or understood in the region. Thus it was my role to introduce the idea of EAGA to some of the local institutions and local officials, such as the immigration official who did not know about EAGA until I introduced it to him. This is a measure of how little impact EAGA has had on Indonesia, and all the indications are that its effects in Malaysia are similar. When I had the opportunity to do the fieldwork in Mindanao, specifically in Davao City and General Santos City (from March to May 2000), I found that EAGA had greater local significance than the literature indicated. In that period, from key resource persons and local newspapers, I became aware of how much the local conditions dominated EAGA activities. Officers and staffs from the local governments and private institutions (such as the Mindanao Economic Development Council/MEDCO and the Mindanao Business Council/MBC), enthusiastically explained programs and plans in order to prepare and implement the EAGA activities. This thesis is primarily based on my field research and related secondary sources. My perspective changed from that of Indonesia to that of the Philippines. Moreover, to understand the political motivation of the Philippines as the initiator of EAGA, the thesis aims to address a gap in the literature on Philippine studies in Indonesia, which is still very limited. Perhaps, its most important contribution is to provide a better understanding about the Philippines from the perspective of its neighbouring country. When the study began in early 1999, the proposal for EAGA was still a feasible one. The transnational cooperation had a lot of economic potential with limited political influence. However, after my fieldtrip to Manila, Davao City and General Santos City in 13

29 2000, the implementation of EAGA seemed more problematic. The key problems, such as lack of adequate infrastructure, lack of capital, policy disharmony and overlycomplex decision-making processes, remain unresolved not only in the Philippines, but also in Indonesia and Malaysia. Accomplishment of the original goals is also difficult because of several different factors operating at global, regional and domestic levels, as will be explained in the chapters of this thesis. Figure 1. MAP OF THE PHILIPPINES 14

30 Research Methodology This study is based on qualitative research carried out primarily through literature review, my previous research in Indonesia and fieldwork in Manila, Davao City and General Santos City, and the latter involved discussions and in-depth interviews. The timeframe of this study is from , which is divided into three different periods: firstly, the beginning of EAGA ( ), including the implementation of Early Action Plan (EAP) and Short Term Plan (STP), that is from 1992 to Secondly, the implementation of Medium Term Plan (MTP), that is from 1996 to Thirdly, the implementation of Longer Term Plan (LTP), that is from 1999 to EAGA reached better achievement in terms of its commenced and preparation of its activities during the Ramos administration ( ). If it is compared to the other administrations, the Estrada administration, for example, the EAGA activities had almost no progress, while President Estrada also tried to abolish the EAGA office in Mindanao. Under the GMA administration, EAGA was revitalised, but it was not for the economic purposes. The revitalisation of EAGA was then used for combating terrorism in Southeast Asia. When I started my research on EAGA in 1999, there was little literature on the topic and in the following years this has remained the case, except for news and information about the progress of EAGA from some websites. I assume that during the first five years of EAGA the planners focused more on a program of development and spreading information within government institutions and the private sector about the zone, in order to provide a better understanding of its activities. Unfortunately, after 1999, there were still people and institutions that had not even heard about it. This lack of literature 15

31 on EAGA became the biggest challenge in undertaking this study. In order to understand EAGA activities, in particular from the Philippines perspective, this study combines observation (fieldwork) and material such as official documents and newspapers. The discussions and in-depth interviews were carried out with a view to providing critical analysis of the documents. Since there is such a lack of EAGA literature, the best place to get information about EAGA has proven to be the departments of Foreign Affairs for the respective countries, although the ASEAN Secretariat also has many planning documents. However, during my study in , MEDCO (the EAGA office in Mindanao) provided more relevant documents rather than the Department of Foreign Affairs in Manila. The major literature on growth triangles comes from studies carried out by analytical bodies based in the Asia-Pacific region as part of analyses of regional development planning. The first significant study involving EAGA came from the Australian government s East Asia Analytical Unit (EAAU) 1995 overview of Growth Triangles of South East Asia. 15 Chapter five of this study provides a brief historical background, and then outlines EAGA s objectives, a profile of each EAGA country, and examines EAGA s strengths, intra-regional trade and investment, prospects and challenges. At the end of the report, there are descriptions of Australia s interests in EAGA, the strongest link being cooperation between Darwin and EAGA in the meat industry, live cattle exports, and computers and telecommunication equipment. 16 The chapter also includes discussion of Australia s effort to develop trade and business links between the ASEAN Free Trade Area (AFTA) and the body concerned with Australia and New Zealand 15 East Asia Analytical Unit (EAAU) (1995). Growth Triangles of South East Asia, Canberra: Australia s Department of Foreign Affairs and Trade. 16 Ibid., pp

32 Closer Economic Relations (CER). The study claims that the EAGA quadrangle, under the umbrella of ASEAN, primarily aimed to accelerate economic development at the sub-regional level, as part of the AFTA, and this analysis is consistent with the report s economic focus on free trade zones. 17 The report s stance has since been superseded by new Australian policies under the Howard Government. Instead of cooperation between Australia and EAGA as a significant way to increase Australia s regional relations in trade and business, Australia has established free trade agreements bilaterally with Singapore (2004) and Thailand (2005). These agreements mean that EAGA is now of little interest to Australia. Other growth triangles were the subject of studies by the Asia Development Bank (ADB). The ADB produced a study of EAGA in The ADB report s was a very biased Integrative Study, in which the political interests of the funding body were dominant. The ADB s unofficial slogan of no political funding for free makes clear that the political reward from every cent that may be spent is calculated beforehand. The report was published when EAGA was at its most progressive moment, only two years after its formation. The study focused more on hopes that EAGA could gain, but the practical suggestions were very limited. The ADB report was unfortunately the only one that the ADB ever did. During the period , there was no investment report from EAGA countries in Mindanao, especially in Davao City. 19 The reason could be because there was not enough funding to do further research, or that there have been no achievements important enough to be published. 17 Ibid., pp Asian Development Bank (1996) v.i Integrative Report, East ASEAN Growth Area Brunei Darussalam, Indonesia, Malaysia, Philippines and v.iii Productive Sectors Agriculture, Fisheries, and Forestry Industrial Development Tourism, East ASEAN Growth Area Brunei Darussalam, Indonesia, Malaysia, Philippines. 19 Davao Investment and Promotion Center (14 April 2000), Davao City, Mindanao. 17

33 The Australian report was soon followed by a study published by the Malaysian Institute of Strategic and International Studies, edited by Imran Lim, Growth Triangles in Southeast Asia, Strategy for Development. 20 This book was primarily put together by protagonists in EAGA, although it included an article by Anwar Maaruf entitled BIMP-EAGA: Problems, Opportunities and Prospects. Maaruf, even at that stage, argued that there were more problems than opportunities and prospects in EAGA. The problems he outlined included perceptions of unequal benefits; inadequate infrastructure; diversity in immigration policies; multiplicity in decision-making; and problems of social and security. 21 His article differed from the EAAU report, which when it analysed the problems and challenges that EAGA planners must consider, identified them as the development gap; lack of transparency and bureaucracy in investment processes (particularly in Indonesia and the Philippines); inadequate transportation facilities; and the security problem of piracy that had the potential to discourage trade and investment within EAGA area. 22 From the Malaysian perspective, EAGA was predicted to achieve dynamic economic development in the two or three decades from its formation, and the initial analyses argued that its many challenges could be overcome. Based on its strengths, namely political commitment and economic complementarities, EAGA could take advantage of its many opportunities and prospects for collaboration in developing natural resources and traditional trade links. 23 In the ISIS book, a key Philippines player in EAGA, Paul Dominguez, provided an optimistic perspective on the establishment of EAGA because 20 Imran Lim, ed. (1996). Growth Triangles in Southeast Asia, Strategy for Development, Kuala Lumpur: ISIS. 21 Anwar Maaruf, BIMP-EAGA: Problems, Opportunities and Prospects in Ibid. pp ADB, op. cit., p EAAU, op. cit., Maaruf, op. cit.,

34 he argued that as a development strategy, EAGA was in line with the principles of GATT. In other words, EAGA needed to be seen as part of a global economic framework, and as a logic consequence of the East and Southeast Asian, or ESEAN, economic trends. Dominguez quotes the view of ISIS chairman Tan Sri Dr. Mohamed Noordin Sopiee that the East and Southeast Asian nations have shifted their global economic weight from the western capitalist economies to the ESEAN economic bloc. 24 ESEAN is thus also seen to be growing as a potential market for the world s goods and services, as well as foreign direct investment (FDI). ESEAN would thus, in this view, become integrated not only by trade, investments, technology, financial and capital movements, but also by the growth of tourism. 25 In 1998, Philippines journalists Marites Vitug and Criselda Yabes wrote a travel book on EAGA. As its title Jalan-Jalan, a Journey through EAGA suggests, the book basically describes tourism in EAGA provinces/countries, which it is intended to encourage. However, the book also provides historical background and a description of economic and political conditions of some provinces and cities in EAGA, such as Balikpapan, Banjarmasin and Pontianak in Kalimantan on the Indonesian side, and Marawi, Palawan and the Sulu islands of Mindanao, and Tawi-Tawi on the Philippines side. 26 The most useful studies for analysing EAGA are those that help us to understand its economic role under the umbrella of ASEAN. The optimistic views of the formation of EAGA have been challenged by the fact that the ASEAN countries and China, Japan, 24 Paul G. Domiguez East Asean Growth Area: the Philippine View, in Lim op. cit., pp Ibid., p Marites D. Vitug and Criselda Yabes (1998). Jalan-Jalan, A Journey through EAGA, Pasig City: Anvil Publishing. 19

35 and North Korea (known collectively as the ASEAN Plus Three, APT) are working towards an East Asian regional trading arrangement. 27 This contradicts the essence of EAGA, which aims for strategic development at the sub-regional level. The development of growth areas, such as IMS-GT, IMT-GT, and BIMP-EAGA, was to narrow the gap in the level of development among member states and to reduce poverty and socio-economic disparities in the region. 28 Within ASEAN it self there are significant differences in terms of economic capability. EAGA planners, therefore, tried to reduce these disparities through this sub-regional arrangement. The East Asian regional trading arrangement would most likely cause more development gaps and increase regional poverty. The wider ASEAN integration should cause a decline in EAGA activity. 29 These studies, as already indicated, focus on economic developments, but the problems they identify point to the importance of political factors in shaping the regional economy. Thus my own analysis is based on a theoretical framework heavily influenced by studies of the political economy of Southeast Asia, in particular the studies produced in Australia by authors such as Rodan and Hewison. The five chapters of my study discuss the theme of the growth triangle from the Philippines perspective. As mentioned above, the data was obtained from various sources, including interviews that were primarily done in the Philippines during the 27 Hadi Susastro (2001). Towards an East Asian Regional Trading Arrangement, in Simon S.C. Tay, Jesus P. Estanislao and Hadi Susastro (eds). Reinventing ASEAN, Singapore: ISEAS; Paul J. Davidson (2002). ASEAN, the Evolving Legal Framework for Economic Cooperation, Singapore: Times Academic Press. 28 Davidson, op. cit., p See also the Hanoi Plan of Action 1998, and the Hanoi Declaration on Narrowing Development Gap for Closer ASEAN Integration See James Parsonage (1997). Trans-state Developments in South-East Asia: Sub-regional Growth Zones, in Garry Rodan, Kevin Hewison & Richard Robison (eds). The Political Economy of South East Asia, An Introduction, Oxford: Oxford University Press, pp

36 fieldwork. A list of the names of respondents who were able to give their time and the institutions where most information came from is provided as an appendix. Respondents were divided into several categories, such as intellectuals, university students, nongovernmental organisations (NGOs) activists, journalists, local governments officials, business people, informal leaders, members of separatism movements, and ordinary people. The capital city of the Philippines, Manila, originally was to be the only place where the fieldwork would be done, because the P-EAGA is part of Philippine national development programs. However, since Manila did not provide much information regarding the preparation and implementation of the EAGA activities, Davao and General Santos City were the best alternatives to obtain more accurate records of the issues. I finally decided to visit Mindanao, although negative views of Mindanao affected my decision at the beginning due to the on-going clashes between the military and the Moro liberation forces. As my time in Mindanao was very short (less than three weeks) I could not approach two of the most important people who played key roles in the emergence of EAGA, Paul G. Dominguez, presidential assistant for Mindanao and chair of MEDCO under the Ramos government; and Lourdes S. Adriano, senior policy analyst, Growth with Equity in Mindanao (or GEM). This institution was meant to help Mindanao fulfil its aim to be the promised-land. Key Research Issues I realised from the literature that it would be necessary to reconcile what appear to be key policy differences between the bodies involved at the different levels of EAGA, since there seem to be major discrepancies between its broader regional role and its 21